Representing the 17th District of New York

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Lowey Urges IRS Commissioner to Drop Proposed SALT Regulation

October 5, 2018

Press Release

Proposed IRS regulation would thwart efforts of New York and other states to help taxpayers shoulder the burdens of the new tax law, including the $10,000 cap on state and local tax deductions; Lowey says the federal government must not place “additional burdens on taxpayers from donor states like New York that contribute far more to the federal coffers than they take.”

WHITE PLAINS, NY – Congresswoman Nita Lowey (D-NY17/Rockland-Westchester), Ranking Member on the House Appropriations Committee, sent a letter urging IRS Commissioner Charles Rettig to amend a proposed regulation that would prohibit New York and other states from providing much-needed relief for taxpayers by circumventing the $10,000 cap on the state and local tax (SALT) deduction imposed by the new tax law.

“The SALT deduction was established to ensure that Americans are not taxed twice on the same income, which is exactly what will happen as a result of the cap,” Congresswoman Lowey wrote in the letter. “My constituents and taxpayers all over New York State simply cannot be squeezed any further, which is why I applauded efforts by the State to enact opportunities for charitable contributions to the state and local governments. This is consistent with federal law and established precedent and the state should be permitted to deliver necessary relief to New York taxpayers.”

Lowey concluded: “For the foregoing reasons, I believe the IRS needs to amend this proposed regulation before it is finalized to ensure that the federal government does not place additional burdens on taxpayers from donor states like New York that contribute far more to the federal coffers than they take.”

Prior to enactment of the new federal tax law, New York taxpayers who itemized could deduct their state and local property and income taxes. The SALT deduction was a major source of tax fairness for high-taxed states like New York, where 35 percent of taxpayers deduct an average of more than $22,000 every year. In Congresswoman Lowey’s district, the 17th Congressional District of New York, the rate is even higher, with 45 percent of taxpayers relying on the state and local tax deduction at an average of $26,000. By capping the SALT deduction at $10,000, the new tax law effectively raises taxes on millions of middle-class Americans who depend on the deduction.

Congresswoman Lowey has been a leader in the U.S. House for restoring the SALT deduction. In January, she and Congressman Peter King (R-NY02) introduced the Securing Access to Lower Taxes by Ensuring Deductibility Act, or SALT Deductibility Act, which would restore the SALT deduction in its entirety. Lowey has also hosted a number of roundtables and forums on the SALT deduction cap, and urged then-Acting IRS Commissioner David Kautter to allow taxpayers to fully deduct prepaid 2018 state and local property taxes on their 2017 returns.

I write with grave concern regarding REG-112176-18, published in the Federal Register on August 27, 2018. The proposed regulation is designed to thwart efforts of states like New York to help taxpayers shoulder the burden of the Tax Cuts and Jobs Act (P.L. 115-97).

According to the Center on Budget and Policy Priorities, the Tax Cuts and Jobs Act (TCJA) will add $1.9 trillion to the deficit over the next 10 years, delivering enormous windfalls to corporations while leaving the nation less prepared to address fiscal challenges. Included in this skewed tax plan is the $10,000 cap on state and local tax deductions, a limitation that in effect raises taxes on homeowners in New York and other high-taxed states in order to finance the corporate tax reduction.

Over the past year, I have sponsored several roundtable discussions and forums on the misguided $10,000 cap and heard from hundreds of impacted constituents. They have good reason for concern: in New York, 35 percent of taxpayers deduct an average of more than $22,000 every year. In my district those numbers are even higher, with 45 percent of my constituents taking an average deduction of more than $26,000. Capping the state and local tax deduction will cost New York families $14.3 billion every year. By way of comparison, in 2015 alone New Yorkers contributed $48 billion more in taxes to the federal government than the state received in federal assistance. New York is already seeing the negative effects of the cap, as home sales in Westchester fell by 18 percent in the second quarter of 2018.

The SALT deduction was established to ensure that Americans are not taxed twice on the same income, which is exactly what will happen as a result of the cap. My constituents and taxpayers all over New York State simply cannot be squeezed any further, which is why I applauded efforts by the State to enact opportunities for charitable contributions to the state and local governments. This is consistent with federal law and established precedent and the state should be permitted to deliver necessary relief to New York taxpayers.

For the foregoing reasons, I believe the IRS needs to amend this proposed regulation before it is finalized to ensure that the federal government does not place additional burdens on taxpayers from donor states like New York that contribute far more to the federal coffers than they take.